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Unemployed? It’s All In The Way You Count It

February 16, 2014

Who’s looking for work these days?  It all depends on how you define the terms, who you ask, who’s measuring the statistic and where they are checking. unemployment A couple of articles caught my eye recently and help clarify the complex unemployment picture.

If it were up to him, Zachary Karabell would scrap the closely watched U.S. unemployment number all together.  Karabell, head of global strategy at the financial services firm Envestnet, argues in his new book, “The Leading Indicators: A Short History of the Numbers That Rule Our World,” (Simon & Schuster), that the U.S. unemployment rate number, announced at the beginning of each month, has outlived its usefulness.

I’ve learned that the unemployment number is a child of the Great Depression, created after the market crash of 1929 and subsequent economic tremors threw millions out of their jobs.  President Herbert Hoover had no way of measuring U.S. unemployment, and the subsequent accounting by Bureau of Labor Statistics revealed the truly horrific scope of the economic crisis.  Ironically, the measurement, initiated by Hoover, helped ensure his loss to Franklin D. Roosevelt in the 1932 Presidential election.

The definition of unemployed — those looking for work who can’t find it – is somewhat misleading.  How do we count, not only the unemployed, but also the underemployed (people with higher education and significant job experience who are working at lesser positions because that’s all they can find)?  And what about those workers who have dropped out of the job market, stopped looking for work because they are frustrated at repeatedly finding no available opportunities? 

The labor participation rate has also received increased attention lately, in part due to record low percentages of working age people in the U.S. who have jobs. A recent installment of the Politics Counts  blog by Dante Chinni, director of the American Communities Project at American University, details hows this participation rate varies widely across geography, much like the unemployment rate greatly varies not only by location, but also by age, sex, education and race.

Karabell points out that unemployment is a highly geographical problem, there are no national solutions for a dilemma that varies so widely across the country.  Similar observations reported by Chinni show the labor participation rate in urban areas is much higher (and has hardly changed) compared to rural areas.  While there are many contributing factors to both of these intertwined problems, different solutions are needed in different areas, and Karabell thinks dropping the fixation on the national unemployment figure would help open the door to some innovative thinking and create more localized solutions.

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